One of the most common investment questions Canadians ask themselves today is, “Which is better, TFSA or RRSP”?
Here’s the good news – it doesn’t have to be an either or choice. Why not do both? Below are the features of both plans to help you understand the differences.
Tax Free Savings Account (TFSA)
- Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income. There is no maximum age for contribution.
- Maximum contribution is $5,500 per year.
- There is carry forward room for each year in which the maximum contribution was not made. For those who have not yet contributed to a TFSA, the cumulative total contribution room as of 2017 is $52,000. Read more
The 2014 Registered Retirement Savings Plan (RRSP) contribution deadline is Monday, March 2, 2015. Here are some facts about RRSPs to help you make the most of this great opportunity to grow your retirement savings, better plan your personal taxes, and enjoy a comfortable retirement.
Make your maximum contribution
Your RRSP contributions provide a deduction from your taxable income, which for most, results in a tax refund when you file your personal tax return.
For 2014, you can contribute a maximum of 18% of your earned income in 2013, to a maximum of $24,270. Refer to your 2013 notice of assessment as you may have additional unused carry forward limit.
This number will be adjusted if you are a member of pension plans and/or profit sharing plans, depending on the value of your benefits in the previous year.
Making the maximum contribution at the beginning of each year will add additional compounding power to your RRSP. Read more